Accounting System and Internal Control

Table of Contents

Company overview

Regulation & Control

Description of the Accounting System

Analysis of the Current System

Fraud

Internal Control System

Conclusion and Detailed Recommendations

Cost Benefit analysis

References.

Appendix.

Accounting System and Internal Control

Inkwell Ltd

Company overview

IWL was established seven years ago by two of its three controlling shareholders, Paul Farnon and Victoria Dawson. The company has a head office on an industrial estate in Birmingham, where its management team and accounts department are both based. It also has a large central warehouse on this site. It sells its products through a nationwide chain of high street shops and also by way of a 24/7 on line shop, which is on the head office site. Anil Gupta bought into the company and joined the board as Finance Director two years ago when the two other directors realized the need to have more professional accounting expertise. All three have previously worked for various companies involved in either the manufacturing or distribution of inkjet and laser toner cartridges. Paul was working as the UK General Sales Manager for Hewlett Packard, a major manufacturer of printers and printer cartridges; Victoria as a Marketing Manager for Rymans, a major office supplies retailer; and Anil as a Finance Manager for Epson, another large manufacturer of printers and printer cartridges.

The company emphasizes the green advantages of its business model, and stresses its environmental advantages as well as the fact that its refilled cartridges are usually up to 20% cheaper than those of the original branded products. Over the past seven years the company has grown steadily and now has revenue of over £16 million. It employs around 180 full-time equivalent employees. Structure

Inkwell Ltd. basically operates with a flat structure, it is used in small businesses, with very few chains of commands and where the majority of employees work at the same level. This structure involves simple communication, decentralized management, less formal communication between managers and subordinates, easier to establish horizontal linkages necessary to coordinate the implementation of clearly defined objectives, less than manifestation of parochialism and selfishness units, and opportunities to express themselves. Given its advantages, flat structure has certain disadvantages, it involves congested management, hindered the control of subordinates, complications in general process of coordinating units.  

1.2. The accounting function within Inkwell is currently administered by seven full time staff altogether. Accounts department's main tasks consist of all aspects of Accounts Receivable (Sales Ledger), Accounts Payable (Purchase Ledger) and as Inkwell is a small company, accounts are also responsible for payroll and Company Secretary Functions.

1.3. The main external stakeholder groups are: the shareholders (the two Directors), debt holders (the Bankers), trade creditors, suppliers, customers and communities affected by the activities. Internal stakeholders are the board of directors, executives, and other employees.

Bank: It is a financial institution that produces various types of transactions with cash and securities and financial services to the Government, businesses and individuals.

Creditor: A creditor is someone who has a right to claim through a debt obligation of a person, company or a sovereign state, called ...